Inflation and the ordinary man...and woman, for that matter

****

The Canadian superstar who is arriving to take over as boss of the Bank of England is dropping some hints about inflation:

...although price stability was central, there were “tolerances” concerning the speed with which inflation would be brought down if the economy was struggling. 

I'm guessing this is posh banker code for carrying on doing what the Bank and the government have been doing - ignoring inflation targeting. There's a really good reason for this, of course, as inflation is a sweet, back-door way of reducing debt. Let's call above trend inflation what it is (especially when it is deliberate as is the case here at the moment), a tax.

Perhaps instead of trying to blind us with banker bollocks, the government should say it's going to do something about the cost of living? Rather than listening to grandees in fancy Swiss ski resorts, maybe the government should come down the pub with me and talk to the people - people with jobs and mortgages - who are being screwed by these policies. People who say things like this:

 "It's all gone wrong - tits up, hasn't it" Says Lewis. In response to my request for clarity he continues, "the economy, the government. Everything has gone up, bread's like 50% more expensive and look at diesel. People can't afford stuff - come March there'll be a real mess. We've got to get prices down."

And I'm sure that I could introduce our lords and masters to a few others with the same problem. Yet the government, stuck in a nonsense of its own making, isn't listening. Or is listening to international banks with huge, dodgy debts.

....

Inflation and the rise of poverty...

****

Amidst all the hand-wringing about poverty and the castigation of the current government for having the audacity to reform the benefits system there is a consistent theme. For sure the typical poverty pundit starts with talk of austerity, with frowny conjecture about changes to benefits and with a side swipe or two at bankers, rich tax dodgers and big business. But then we get this:

...and the extraordinary rise in British food prices – up by 40% since 2005, according to Oxfam – have pushed them into hunger.

And this:

The collapse in living standards means that those who once lived comfortably now worry about filling their cars and those who once scraped by worry about filling their bellies.

The writer (in a depressingly inaccurate and effortlessly polemical way) isn't talking about the actions of government but about inflation. The inflation that means it cost me over £70 to fill the tank of my car the other day. The inflation that has seen the price of some basic foods - bread, for example - nearly double.

Yet our masters - the grand old men in the Bank of England, the 'oh-so-clever' mandarins in the Treasury and the great and good of international finance - tell us there is no inflation. That the problem is quite the opposite - deflation. And while they're saying this (and while the UK's inflation rate continues to be above the target rate month after month eating away at savings, punishing folk on low or fixed incomes) there are queues at the food banks. Queues caused by the Bank's fixation on the deflation that simply isn't there not on the inflation that is.

....

Austerity - everywhere but government

aus·ter·i·ty/ôˈsteritē/

Noun:

Sternness or severity of manner or attitude. Extreme plainness and simplicity of style or appearance.

Or as European voters would have it, a monstrous evil loaded upon them by bankers and their cronies in government. But what exactly are we speaking of here – what exactly do we mean by ‘austerity’?

I’m not here to present some sort of economic case as to the existence or otherwise of austerity, of a time when financial reality forces us to adopt – from necessity – that plainness and simplicity of style. The truth is that austerity for most of us is a fact but the austerity isn’t being driven by cuts in public spending – there are, in aggregate, precious few of those cuts. No, the circumstances forcing us to live an austere life are coming from the private sector and from the manner in which governments have responded to the unresponsiveness of the private economy.

Look around you, speak to a few of your neighbours, wander down the food aisles of the supermarket and, above all, spend an hour or two watching television advertisements. All will tell you of two things – the two things that are bringing that unwanted austerity upon us:

1. We have less money in our pockets – for some of us this is because we don’t have any work but for nearly everyone the amount has fallen because employers, struggling for business, aren’t raising wages, are reducing hours, cutting overtime and ending bonuses. Plus, of course, the government, fixed on its own cash flow problems has bunged up taxes
2. What money we have in our pockets doesn’t buy as much – that’s right folks, we’ve never had the deflation we were promised at the start of this crisis. The clever folk in the treasury told us that we needed to keep real interest rates negative because otherwise deflation would destroy value and wealth – we would be doomed. Some of us said this was rubbish and that the government wanted some inflation so as to reduce its (and the banks’) debt problems. And we were right – there’s now been at least four years of above trend inflation. That’s four years where savings have shrunk, four years of price rises. Plus, to cap it all, the government has put up taxes – VAT, excise duties, airport tax

Austerity isn’t a consequence of reduced government spending but of other government actions – taxes that are too high, interest rates that are too low, running the Royal Mint’s printing presses at full whack and failing to cut spending. Yes that’s right – failing to cut spending.

Let’s remind you that over three years Bradford Council will have cut over £100 million from its budget – that’s 25% of what we get in grant from government. And it’s true, jobs have gone, some unnecessary cuts have been imposed, a few facilities have closed but, in the main, the “cuts” have barely inconvenienced the majority of the City’s population.

And look a little further – those financial strictures haven’t been applied to the NHS where budgets have risen not fallen, we’re still spending millions each week maintaining an unwanted armed presence in Afghanistan and the merest of dents has been made in the welfare budget. In truth the government predicts that spending will rise by £50 billion between 2011 and 2015 – what sort of dire austerity is that?

Yet there is austerity – people are struggling out there, we may not have starvation but everywhere you’ll see faces telling you it’s tough. As I said, watch those adverts – not just the offers of loans or the debt scams but the everyday adverts. Look at the styling, consider the way we now see less of the flash, hedonistic and aspiration imagery and instead get and older, solid, calming language.

And that austerity is the fault of government – for they have created the inflation, they have increased the taxes, they have made the jobs more expensive. What they haven’t done is cut their own spending.

....

The only bit of the economy that's growing is...

****

...government.

As I observed yesterday in a point about jobs, these cuts, this austerity - at least as far as the public sector is concerned - seem pretty illusory:

Well, strictly, “government and other services”, so it includes defence, the National Health Service and so on, but also private education and private healthcare. That sector of the economy has expanded by more than 5 per cent since 2008; health and social care has expanded particularly strongly.

The only austerity measures have been tax rises - higher taxes on buying stuff, the closing of so-called loopholes and an avalanche of increases in duty on things like booze, fags and petrol.

The public sector - and all us politicians hovering round its honey pot - isn't where the austerity is biting. We're OK - it's the bloke who hasn't had a pay rise in five years and can't afford his pension any more, the pensioner on a fixed income while inflation rockets and the mum juggling a part-time job with a couple of children, who are being bitten.

And - however much it may pain the big unions, the Labour party, the panjandrums of civil service and the state employees at the BBC - the answer is still just what is was back in 2008, and 2009, and 2010, and 2011...

...cut taxes on incomes, reduce the tax on jobs that is employers national insurance and stop treating businesses as if they are the spawn of Satan rather than the only hope for us seeing out the recession.

Get on with it...

....

A thought about debt...

This morning while trundling along going nowhere on the treadmill my mind wandered onto this thorny problem of "the debt". After all it's the subject of great discussion by our masters across Europe as we come to terms with the impact that years of artificially low interest rates and profligate governments have had on the national balance sheets.

One argument out there is what we might term "debt denial" - or rather the belief that by taxing rich people and rich companies a little more all the problems will go away. The more sophisticated voices out there put on their best frowny clever-person faces and tell us that, of course, government debt is different:

What I have in mind is this idea that you can keep running deficits which, if they grow no faster than GDP, can create a debt that is stable at a desired share of GDP.

Got that folks? Spotted the problem haven't you! It's the Mr Micawber principle:

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." 

The problem is the fundamental rule of debt. At some point you have to pay it back - with interest. Government debt is objectively no different at all from the debt that you and I may have as private persons - we borrow money and, at an agreed point, pay that money back. To pretend otherwise is to believe a nonsense.

Right now we are playing two games to avoid having to face up to repayment - firstly we're inflating the economy with freshly printed moolah. If the value of the pound in your pocket gets smaller through this inflation it means the debt on the government's balance sheets (including all that private debt they nationalised when they "bailed out" the banks) also gets smaller. Less to repay!

Secondly we're urging economic growth - using exactly the same methods (low interest rates, government funny money, infrastructure projects) that created the problem in the first place. The bet is (and it's a bet with your and my money) that the extra money in the economy will stimulate economic growth which will help solve the problem by producing more tax income and thereby reduce the need to borrow.

In the meantime government continues that borrowing (and the Bank of England its printing of money to lend to the government) so as to avoid the discussion about that first principle of debt - you have to pay it back.

As Mr Micawber knew and clever economists, bankers and politicians forget, we should live within our means.

....

What aid might teach us about quantitative easing

****

In times past we used to think that one effect of international aid was to act as an economic stimulus. And, in orthodox economics, this rather makes sense – we get an increase in cash within the local economy thereby stimulating demand.

The main role of foreign aid in stimulating economic growth is to supplement domestic sources of finance such as savings, thus increasing the amount of investment and capital stock. As Morrissey (2001) points out, there are a number of mechanisms through which aid can contribute to economic growth, including (a) aid increases investment, in physical and human capital; (b) aid increases the capacity to import capital goods or technology; (c) aid does not have indirect effects that reduce investment or savings rates; and aid is associated with technology transfer that increases the productivity of capital and promotes endogenous technical change.

However, the research into the effects of aid on growth are mixed – there is no consistent evidence that international aid stimulates economic growth. For example:

(1) The effect of direct foreign investment and aid has been to increase economic inequality within countries. (2) Flows of direct foreign investment and aid have had a short-term effect of increasing the relative rate of economic growth of countries. (3) Stocks of direct foreign investment and aid have had the cumulative, long-term effect of decreasing the relative rate of economic growth of countries. (4) This relationship has been conditional on the level of development of countries. The stocks of foreign investment and aid have had negative effects in both richer and poorer developing countries, but the effect is much stronger within the richer than the poorer ones. (5) These relationships hold independently of geographical area.

There remains a debate about the effect of aid but it is very clear that the simple fact of stimulus – the mere presence of the aid money – is not sufficient to promote growth. Some argue that the policy environment is important (and here there is a debate as to whether macro considerations such as trade openness and fiscal policies are more or less important than micro considerations such as protection for property rights and labour market flexibility). But whatever the details, the fact remains that simply chucking in a load of new cash -  in return for absolutely nothing – won’t do the stimulus job.

Which begs a question – there’s ample evidence of ‘Dutch Disease’ resulting from aid transfers. In simple terms, aid creates inflation making it more expensive to export and therefore harder for the recipient country to grow.

It seems to me that any policy designed to promote inflation in an economy – for example quantitative easing – runs the risk of having the same effect as international aid. Namely a significant risk of inflation and its associated brake on real growth. If we pretend – by the use of legerdemain and jargon - that quantitative easing isn’t inflationary, then we are kidding ourselves that billions in new money can be created and poured into the economy without that money having any effect.

The latest bout of quantitative easing is akin to giving the economy – worn down by years of self-abuse – a large espresso and hoping that will do the job of waking it up. For a short while it will feel OK and then the underlying hangover will kick back in – maybe worse than before.

....

In which Paul Krugman explains the morally repugnant Plan B...

****

Inflation. Yep, that's it really. That's the Plan B. Rampant inflation, the nationalisation of private savings and the impoverishment of those on fixed incomes or living off those savings.

But Paul Krugman thinks inflation is fine:

I pointed out that the last time we were in an economic trap resembling our current predicament, inflation actually helped get us out.

All inflation does is take my savings and use them to pay off other people's debt - which right now means the government's debts. That's it. And to propose allowing inflation as a cure for 'depression' shows just how much disdain the left have for ordinary people who work hard, save for their retirement and - as the saying goes - do the right thing.

 It is wrong - morally wrong and pretty repugnant - to say that inflation is in any way a cure for our problems. But then Krugman, as a left-winger, wouldn't know repugnant immorality if it slapped him in the face.

...

Yes Ed, inflation is a problem but one of your making and to which you offer no solution

***

The Labour Party, in the form on the Two Red Eds that lead it, has discovered inflation:

Labour leader Ed Miliband has warned of an impending "crisis" as the cost of living outstrips wage rises for people on low and middle incomes.

In a speech he said people were working "harder for less" because of long-term changes to the British economy.

And Ed Balls:

In an interview with the Sunday Times, the shadow chancellor warns of Britain's "cost of living crisis," and demands that George Osborne reverse the VAT increase. Much of his pleading is made on behalf ofof days ago – face punishment at the petrol pumps. motorists, who – as I pointed out a couple

Doubtless we shall see dozens of similar comments from Labour politicians and their friends none of them speaking to the central issue in this debate – the real worldwide increase in costs. And we can point to two factors driving this inflation. The first one is over in China:

"It is becoming impossible to find people to work," said Han Zhongliang, a 46-year-old factory boss from Hubei. "I have been here ten years and I used to have 30 to 40 employees. But this year I will be lucky to find 20 who can do the job are willing to work for the wage we offer: 5,000 yuan (£490) a month. If things keep on like this, there won't be any labour at all in South China in five years time. Since the Olympics, it has just been worse and worse for our business."

The rapid growth in China is raising the cost of the biggest input – wages – and this is feeding through to our high street. Coupled with China’s own inflation issues (which their government has been slow to respond to as it prefers an exchange rate that promotes exports), this is the first factor driving our high inflation rate.

The second factor is closer to home:

The Treasury has approved the MPC to buy up to a total of 150B pound of bonds through the creation of central bank's money. This represents 10% of GDP, 7.5% of broad money supply (M4), 12.3% of M4 by households and non-financial corporate and around 3% of the total assets of UK banks. The Chancellor also requested that among the 150B pounds, 50B pounds of which should be used to purchase private sector assets.

In the coming 3 months, the BOE will deploy the initial 75B pound in medium- to long- term gilts (outstanding maturities of 5- 25 years). The purpose of such policy is to boost broad money supply and credit and thus raise 'the rate of growth in nominal spending to a level consistent with meeting the inflation target in the medium term'.

Note that last sentence – the treasury expected inflation to be above trend in the short-term. And of course these phrases, “short-term” and “medium-term”, are supremely flexible (and, of course, in the long-term we’re all dead). And it has, of course, come to pass:

The Bank of England claims to target (and hit) inflation two years hence. And as you can see, back at the start of 2009, the Bank of England's "central forecast" ...saw UK consumer price inflation slipping towards zero by the end of 2010...

Ah right, that didn’t happen – inflation stayed above 2% throughout 2010, we never had that deflation we were promised by all those economist bods. So is the bank about to raise interest rates – the main tool to control inflation?

Perhaps that's where the FT's economics editor got the idea that the Bank of England is about to raise rates. Because, if symmetrical targeting were really the aim, as stated, then an aggressive series of rate rises would surely be warranted by inflation running above the upper-tolerance of 3.0% for 13 months in a row.

Well either that or:

In its latest quarterly report published today, the Bank upped the probability of inflation overshooting its 2% target over the next three years.

While it reiterated its central forecast that inflation will fall back to 2% in two years' time..., the Bank bases this on 'market expectations of rate rises' - the implication of which is that rates will go up this spring, with May as the best bet.

So there you have it folks – currently the Bank of England, guardian of our monetary stability, is happy to collaborate in destabilising the currency in the interests of reducing the impact of debt. After all, every month of higher inflation – and its current double the target rate – reduces that debt burden a little more easing the government’s pain.

At the cost of our savings, of course!

It’s an easy target for The Red Eds to talk about the “cost of living” – and the government could do more by reducing fuel duty and cutting taxes – but much of the problem came from the policies that Mr Balls and Mr Miliband supported while they were cowering in Gordon Brown’s bunker. However, just as was the case with past Union-controlled Labour leadership, the Red Eds seem more concerned with the level of wages than with the price of goods or the rate of interest.

Mr Miliband said a single-earner couple on £44,000 a year with two children "sounds well off" but would be hard hit by the loss of their child benefit.

He said the rise in VAT combined with the scrapping of child benefit, cutting the childcare element of working tax credit and public service cuts would hit families with children: "Taken together I believe these changes will mean a cost-of-living crisis for ordinary families in Britain which will have a deep impact for years to come".

And he suggested companies could be rewarded with tax incentives to pay staff a "living wage" - higher than the minimum wage - and encouraging companies to invest in training their employees to help them get on.

So in The Red Eds’ world, the way to deal with “cost of living” pressures (aka inflation) is to raise the costs of employing people – either through higher taxes (on everything except petrol it seems) or higher wages. With imports more expensive due to the pound’s relative weakness and those imports further subject to upward price pressures from China’s growth, Middle East revolutions and the commodity price spike, making it even more expensive to run a business will only increase inflation!

Yet again we see the left drifting towards the policies that brought us wage and price controls, inflation rates in double figures and loud, beer-bellied union leaders dominating the political debate with loud demands for more.

In short, any strategy for tackling the squeeze on living standards has to see unions and collective bargaining as part of the solution. The right get this, but from a wholly different political perspective - witness the assault on unions and collective bargaining in Wisconsin, or the Economist’s recent call to arms against public sector unions.

Seems nothing changes!

....

 ....

Seems I'm going to be right on inflation too!

****

Even the estimable Guido Fawkes has joined The View from Cullingworth in predicting higher inflation:

+ + + CPI 4% Inflation – Double Bank of England Target + + +
+ + + RPI 5.1% Shoppers Feel the Squeeze + + +

 

And remember...you read it here first:

What Gordon would really like is to get his hands on our savings. On the billions we have squirreled away for our retirement, to pay for long-term care, to provide for our kids education, to do any number of little things we thought were important. But nothing is more important than Gordon pretending he doesn’t have to cut public spending. Nothing. Not your retirement pension, not the lump sum to pay off your mortgage, not the cash sums you’d like to give to your grandchildren. Nope. Gordon needs that money.
And he’s going to get it. Not by confiscation – that wouldn’t be popular. He can’t introduce a stinging wealth tax without plumbing new depths of unpopularity. But he’s going to get it…

…he’s going to use inflation to make your meagre savings get him out of the mess. Let it rip…last month +1% - the most rapid increase on record. This month +0.6% - the second biggest monthly increase. And next month? Expect similar.

That was February last year - sadly, with a new government, little has changed. Our masters want a little inflation:

“I don’t want to see the Bank of England put up interest rates,” says Sir Martin. “What happened in the fourth quarter shows the perilous nature of making forecasts. But I can’t see the Bank raising rates with growth having slowed. I get the sneak feeling that the West wants a bit of inflation.”

Don't say you weren't warned!

....

Take your pick...thoughts on inflation from an ad man and a milkman

****

Today's Daily Telegraph includes an interview with Martin Sorrell, boss of advertising group, WPP that focuses on the discussions at the Davos World Economic Forum. And Sorrell's conclusion?

“I don’t want to see the Bank of England put up interest rates,” says Sir Martin. “What happened in the fourth quarter shows the perilous nature of making forecasts. But I can’t see the Bank raising rates with growth having slowed. I get the sneak feeling that the West wants a bit of inflation.” 

Contrast this with a very different view, from a very different businessman - Lewis, Cullingworth's milkman. First though you need to know that Lewis had imbibed a glass or two and also that the reported speech below is bowdlerised. Anyhow, here it is:

"It's all gone wrong - tits up, hasn't it" Says Lewis. In response to my request for clarity he continues, "the economy, the government. Everything has gone up, bread's like 50% more expensive and look at diesel. People can't afford stuff - come March there'll be a real mess. We've got to get prices down."

Much though I admire Martin Sorrell, I'm with Lewis on inflation. And we could start by cutting petrol duty and scrapping the VAT increase.

....

"La, la, la. Not listening, not listening." The Bank of England and the inflation threat

****

It is a while since I’ve commented on the extent to which our economic lords and masters are ignoring the damage that consistent above-trend inflation is doing. However I was prompted by the observation – from this source – that:

Most inflation is being caused by indirect taxation by the state

Now, while it is true that increases in VAT and in duty on fuel, fags and flying affect prices, this is not the full story. Over the past couple of years a range of excuses have been set out for our relatively high inflation rates – upward fluctuations in oil prices, poor grain harvests, bad weather and so on. Yet throughout all this – and even when rates of VAT were reduced temporarily – there was not let up in the rate of inflation exceeding both trend rate and the Bank of England’s forecast rate.

Back in February 2009, the Bank forecast that the inflation rate today would most probably be between 0% and 1%. They reckoned there was a 1-in-4 chance that prices would actually be falling (i.e. the Dreaded Deflation), and the chance of inflation being over 2% was put at well under 1-in-10.

Crank forward to February 2010 (just 9 months ago), and the Bank had nudged up their forecasts a bit - they now said inflation would most likely be between 0.5% and 1.5% by now. But they still thought there was a good chance of lower inflation, and still a 1-in-5 chance of deflation (despite the fact that the printing presses had been running in overdrive for a year).

And now? Well, today's CPI inflation has actually turned out to be over 3%. And even the Bank's own November forecast acknowledges its back on a rising track.

So there you have it, the Bank of England – along with plenty of others - has hitched its wagon to the idea that we face deflation which requires us to have, what are in effect, negative interest rates. And today the Bank confirmed that rates won’t rise. And this is despite a big hike in commodity prices, continuing concerns about food prices and the VAT increase.

While all this is going on the Treasury is jumping up and down on the high street banks asking why they aren’t lending any money.

U.K. Chancellor of the Exchequer George Osborne said Tuesday that the government is in discussions with banks to ensure they make a material and verifiable increase in lending to businesses, especially smaller firms.

So let’s think about this George. The banks aren’t very keen on retail lending at the minute despite the Government having printed plenty of money (alright I know they haven’t actually printed any more notes then usual but shovelling money into the banks’ balance sheets* amounts to the same hill of beans). Now why do you think this is? Why aren’t the banks lending?

Spotted it! Banks aren’t lending because they’re losing money doing so – and, quite understandably, banks are not especially keen on making more losses. All that money (along with the make-believe money from the Government) is sitting snugly in the banks’ virtual vaults waiting for interest rates to rise. And the banks know rates have to rise because inflation can’t be allowed to continue at current levels for much longer.

If the Bank and the Government want to stimulate lending the best way to do that is to raise interest rates. Right now the banks are making plenty of money doing their everyday transaction management and ‘moving money around’ business and see no real point or incentive to encourage risky small business lending. Plus, of course, raising rates would reduce inflationary pressures.

Unless, of course, the Bank and the Treasury are really rather pleased about above trend inflation – what better way to reduce the deficit and control the debt! At the expense of savers, shareholders and those who didn’t behave like Viv Nicholson during the last decade.

*Technically QE isn’t ‘monetising Government debt’ as the Government isn’t buying its own debt. Third parties (banks and so forth) are buying the government’s debt. And the assets bought by the bank with QE are different and separate from this. Or put simply – we give the banks cash and they (and their clients) buy government stocks. This is of course wholly different from ‘Mugabenomics’.

....

Economic forecasting, inflation and the 21st century bankers' ramp

The question of inflation has again been on my mind. Not the usual concern about how inflation is being used as a stealth tax but a more technical concern. One reflected in this quote from a short piece by Andrew Sentence, a member of the Bank of England’s Monetary Policy Committee (MPC):

Bank's inflation forecasts have consistently underestimated the upside impact from rising global energy and commodity prices and persistently overstated the downward pressure on inflation from spare capacity in the UK economy.

Put simply, since 2007 the Bank of England has consistently got its inflation forecasts wrong and the error has nearly always been to underestimate the rate. And while this may seem to be a technical consideration, we should recognise that the result of this under-estimation has been a monetary strategy predicated on the expectation of deflation during a period when, in fact, inflation rates were rising. There is no doubt in my mind that this error – compounded over time – is damaging our economy.

But why do we make the error? I am not minded to consider that it is some form of dark conspiracy intended to manipulate the economy in the interests of a corrupted banking system (although at times it does seem that way). Perhaps it lies in that quote from Andrew Sentence – we are wedded to the idea of recession representing idle capacity. Of great machines standing unused, waiting for glimmers of hope – those legendary green shoots – before surging once again into action.

Yet the truth is that – even in manufacturing and distribution – businesses simply do not hold large amounts of spare capacity. Just-in-time processes, outsourcing and a more flexible labour market (domestically and internationally) have made that unnecessary. Just look at the rate of job creation in the productive sector since growth began again in the UK:

…the UK economy has returned to growth more strongly than most expected. UK GDP has grown by 2.8pc over the past year – ahead of the pace of recovery in the early stages of the previous two recoveries.

Employment has risen by around 350,000 since early 2010. And manufacturing industry has recorded the strongest growth since 1994, supported by strong global growth and a competitive exchange rate.

All of which is, of course, contributing to inflation. Indeed when we look at the world market prices for primary commodities – wheat, oil, gas, copper, coffee – we see buoyant, rising prices driven by growing international demand. And this is driving inflation. Unless of course you’re Paul Krugman – who may be a Nobel Prize winning economist but believes that rising commodity prices are a signal of deflation!

It seems to me that economic forecasting – whether it be growth, inflation or employment – has become less reliable because it is stuck with models created to describe a pre-internet, manufacturing economy rather than today’s more flexible and responsive business environment. None of this suits the banks – who are bothered about all those, now unsecured, property loans on their books rather than about the real economy. And sadly – as we’ve seen in the UK, in the USA and tragically in Ireland – our political masters are so in hock to the banks (in order to keep all those expensive public services going) they’ll damage the real productive economy rather than allow the truth about banks, government and property to come out into the open.

…so maybe it really is a bankers’ ramp?

....